Buying a house as a single woman has become more mainstream over the past few decades. This rise is partly due to an increase in the share of households headed by single women and gains in education, which often correlates with homeownership.
However, solo homeownership brings a unique set of challenges. From financing the purchase to maintaining the property, single homeowners have to navigate the multiple aspects of homeownership on their own. This guide looks at how single women homeowners can set themselves up for a successful home search and home buying experience.
SPONSORED: Find a Qualified Financial Advisor
1. Finding a qualified financial advisor doesn't have to be hard. SmartAsset's free tool matches you with up to 3 fiduciary financial advisors in your area in 5 minutes.
2. Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests. If you're ready to be matched with local advisors that can help you achieve your financial goals get started now.
Should a single person buy a house?
Buying a house when single can be a wise investment; however, it brings both advantages and disadvantages, financially as well as personally. Here’s a look at some of the pros and cons of buying a house as a single woman.
Pros for single women homeowners
- Not wasting money on rent: A mortgage payment can sometimes be comparable to what you might pay in rent. Our rent vs. buy calculator can help you compare the cost of buying versus renting in your area.
- Building net worth: As a single homeowner, your mortgage payments go toward building equity in a home that is yours and yours alone. You’ll reap 100% of the wealth-building benefits that come with owning a home.
- Stability: Homeowners have a sense of security that renters don’t. Single homeowners won’t be subject to rent increases or having to move if their landlord sells the property.
- Autonomy: Buying a house as a single woman brings a heightened sense of independence and freedom. You can live where and how you want and are free to make decisions on your own.
Cons for single women homeowners
- Difficult to qualify for a loan on a single income: As a single woman homeowner, having just one income can work against you when applying for a mortgage. Single homeowners may only qualify for lower loan amounts, limiting their borrowing power.
- More responsibility: Single women homeowners reap all the benefits of owning a home, but they also have 100% of the responsibility. From the financial commitment to maintaining the property, it’ll all be on your shoulders.
- Less flexibility: As a single woman homeowner, decisions like moving, traveling or taking a new job may be more complicated to make.
- Responsible for repairs and maintenance: Homeowners often underestimate the work and total costs of owning a home. Maintaining a home adds recurring expenses on top of a mortgage payment. As a single woman buying a home, you’ll have to take on those expenses and responsibilities on your own.
6 steps to help you buy a house as a single woman
If you’re buying a house as a single woman, you’ll go through the same process as everyone else. Prepare for these steps to ensure you have a smooth home buying experience.
1. Build your credit
The strength of your credit history plays a significant role in every mortgage lending decision. And when you’re buying a house as a single woman, it becomes even more critical since the lending decision will be based on your information alone.
Begin by knowing where you stand. Check your credit reports and take steps to improve or maintain good credit. Here are a few things you can do:
- Automate payments: Payment history accounts for 35% of your FICO Score. Automating your debt payments and other monthly obligations ensures you’ll make your payments on time.
- Keep utilization low: The percentage of your available credit also plays a significant role in your credit score. Using too much of your available credit signals that you may be overextended in your financial obligations.
- Avoid taking out other loans: In the months leading up to applying for a mortgage, avoid taking on new debt, which can cause your credit score to drop initially.
2. Save for a down payment
Coming up with a down payment for a home is a hurdle all borrowers face. Fortunately for single women homeowners and all buyers, many loan programs have no or low minimum down payments, as well as flexible income and credit requirements.
Loan program requirements
- Credit score needed: 620
- Down payment: 3%
- Credit score needed: 500
- Down payment: 3.5% with a 580 or higher credit score; 10% with a 500 to 579 credit score
- Credit score needed: No credit score requirements (Some VA lenders look for a 620 credit score or higher.)
- Down payment: No down payment requirement
- Credit score needed: No credit score requirements (Some USDA lenders look for a 640 credit score or higher.)
- Down payment: No down payment requirement
3. Determine your budget
Before applying for a home loan, get an idea of what you can afford. Even if your lender approves you for a particular loan amount, you’ll need to determine if the payment is realistic for you. And remember to factor in routine home maintenance and repairs.
To help stay on budget during your home search, create a list that divides your needs from your wants. For example, you may determine that a home with three bedrooms is nonnegotiable, but having a two-story colonial isn’t a must-have. Creating this list before you begin looking at properties will help you approach your home search from a practical perspective and increase your chances of sticking to your budget.
4. Shop around for the best rates
The interest rate on your loan is one factor that determines your monthly payment and the overall cost of the loan. Shopping around for the best interest rates is one way to make sure you get an affordable loan.
As you begin your home search, plan to get rate quotes from multiple lenders. When comparing loans, be sure to look at the interest rate, annual percentage rate (APR), monthly payment, total cost of the loan and any other loan details. You can also negotiate terms with the lenders to make sure you get your most favorable loan.
5. Secure a prequalification letter
When buying a house as a single woman, be sure to get a prequalification or preapproval letter from your lender. Taking this step will give you a couple of advantages when home shopping. First, it shows your real estate agent and sellers that you’re a serious buyer and that financing won’t be an issue. Plus, you’ll be poised to jump on properties quickly in a hot market.
But while prequalification and preapproval are often used interchangeably, there’s a difference between the two terms:
- Prequalification: Lenders will typically check your credit reports and review your income and savings based on the information you provide in your application.
- Preapproval: Lenders will typically check your credit reports and verify your income and savings by asking for documentation or proof.
A preapproval generally holds more weight than a prequalification. However, the processes and criteria for preapproving or prequalifying buyers can differ between lenders. Plus, some lenders will only offer a preapproval, while others just provide prequalification. Find out what your lender offers, and ask what their process is.
Tips for getting approved for a mortgage on a single income
With your prequalification or preapproval letter in hand, you’re ready to shop. But remember: You’re not fully approved for a mortgage until a seller accepts your purchase offer and you submit a complete application to your lender. As a single woman buying a house, your mortgage application will depend on your information alone.
Keep these tips in mind to increase your chances of approval:
- Keep your debt-to-income ratio low: To ensure you can afford a mortgage payment, lenders will look at your debt-to-income (DTI) ratio; this indicates the percentage of your income that goes towards debt payments. To calculate your DTI, divide the total of all your monthly debt payments (including the expected mortgage payment) by your gross monthly income. DTI requirements vary by loan type and lender. Many lenders will look for a DTI of 43% or lower, though they may permit a higher one in some cases. Still, keeping your DTI well below the lender’s maximum will work in your favor.
- Consider multi-family homes: When you purchase a multi-family property, the lender will count a portion of the expected rental profit towards your income. This can help you qualify for a larger loan.
- Shop below your means: When you receive a mortgage preapproval, the amount you’re preapproved for is the maximum loan amount your lender will lend to you. But you don’t have to purchase a home at that amount. Consider shopping well below your approved loan amount to ensure you can afford the mortgage. To keep your purchase price low, consider the property type, location and other factors that contribute to home price. For example, you may want to consider purchasing a condo or a home just outside of your desired neighborhood.
6. Protect your investment
Buying a house as a single woman can be a financially savvy move, but you’ll want to protect your asset, especially in the event you get into a serious relationship. Consider these tips to safeguard your investment for the long term:
- Get a prenup: If you’ve built up a significant amount of equity before deciding to get married, consult a lawyer to see if keeping the home separate from your marital assets would make sense. Establishing the property as a premarital asset will ensure the home equity remains yours in the event of divorce.
- Be smart when having someone move in: If you choose to let a partner or anyone else move in with you, decide how you want to approach it ahead of time. Establishing a lease or other written agreement to discuss how you’ll split the mortgage payments will protect you if they fail to pay their portion. Avoid putting anyone else on the deed, which would allow them to share ownership with you.
- Shop around for home insurance: You’ll want to protect your asset by making sure it’s insured adequately. However, you can take steps to lower your insurance premiums, such as installing security systems and comparing rates between multiple insurers.
- Prepare for the unexpected: Owning a home can come with many ups and downs. Prepare for the bumps by keeping a healthy emergency fund.
Financing help for single women
While there’s no specific home loan for women on the national level, organizations in your state, city or local community may offer grants or programs that are targeted to your situation, such as being a single mother buying a house or having income that falls within a specific range.
In addition, single-women homeowners have access to the same mortgage programs as everyone else. Consider working with a local HUD-approved housing counselor to learn of your loan options and any local grants or home loan programs.
- 5 hot cities for real estate investing in 2021
- Here’s how much it would cost to live in 10 of TV’s most iconic homes
Featured Image Credit: gpointstudio/istockphoto.